Only 1% of households were headed by single fathers back in 1960. By the time of the most recent Pew Research Center study in 2013, that number had jumped to 8%. If you’re in this growing group, read on. Tax law is gender neutral, so whether you’re a single father or a single mother, the same rules apply when you file your tax return if you’re raising a family on your own.
Are your kids your dependents?
The Internal Revenue Service does not allow both parents to claim their kids as dependents. If you have a custody agreement or divorce decree, the IRS generally gives the dependent deduction to the custodial parent named there, but this isn’t an ironclad rule. A custodial parent can give permission for the non-custodial parent to claim the child by filing Form 8332.
Technically, the IRS allows the parent with whom a child spends the majority of the year - six months or more - to claim a child as a dependent. The IRS gauges time by the number of overnight stays a child spends with each parent.
- So even if your son is with you all day, if he goes to his other parent’s house to sleep, then you are not the custodial parent for that day.
- If he spends six months plus one day worth of overnights with you, you can likely claim him as your dependent.
Circumstances can change after a custody agreement goes into effect, but the changes are not always reflected in the paperwork.
Example: The custody agreement says that your son stays with you two nights a week, but that went into effect five years ago. Now he’s 14 and wants to spend more time with his other parent.
Regardless of the agreement, he’s spending more nights at your house. If these overnights add up to six months plus one day, you can generally take the dependent tax deduction, regardless of the terms of the agreement or decree.
The IRS looks to the reality of the situation, not to the document. For this reason, it is important to keep careful documentation of exactly how many days your child sleeps at your house. This is also true if you were awarded custody. You cannot assume custody automatically guarantees the ability to claim a dependent.
When both parents claim the same child
Divorced parents should communicate clearly in advance of tax season to establish who will claim the child or children. In the event of a dispute where the child’s overnights are split evenly between the parents, the IRS will award the ability to claim the dependent to the parent with the higher AGI (adjusted gross income).
When both parents claim a child on an electronically filed tax return, the second return will be rejected (the one filed later) as the child’s social security number will have already been used on a return. If, however, you believe you have the right to claim the child (according to the dependent tax rules), you can dispute this.
Here are the steps:
- File a paper return instead of e-filing it. You can continue to prepare it online, but you will need to print it and mail it instead at the end.
- Include a letter explaining the situation, along with evidence (like school registration and medical records), proving that you have the right to claim the dependent(s).
- The IRS will review both returns, contact both of you by mail for further proof if necessary, and then decide which person can claim the dependent(s) based on current tax law.
The right tax filing status
Supporting and housing your kids affects not just having a dependent on your tax return, but your filing status, too. If you’re unmarried and without dependents, you’re a single filer. But if you’re supporting your kids, you may qualify as head of household, which offers some additional tax perks, such as a larger standard deduction and more generous tax brackets.
You probably qualify as head of household if:
- You’re unmarried on the last day of the tax year
- You can claim at least one of your children as a dependent because they lived with you more than half the year
- You financially provide at least 51% of the costs of supporting your household
If you filed for divorce and it isn’t final yet, you might still qualify if you didn’t live with your spouse after May 31, as long as you meet all the other rules.
You may be eligible for tax credits
Claiming your kids as dependents also allows you to claim certain tax credits. Credits are generally more beneficial than deductions because they directly reduce the amount of tax you owe to the IRS after you’ve calculated your tax liability, rather than just lowering your taxable income the way deductions do.
With a dependent child, you might qualify for the Child Tax Credit.
For tax years 2022 through 2025 and 2018 through 2020:
If you qualify as head of household, and your adjusted gross income is less than $200,000, you can shave as much as $2,000 off your tax bill for each dependent child by claiming the Child Tax Credit. However, for each $1,000 of income above the $200,000 threshold, your available child tax credit is reduced by $50.
You also can claim a credit for some of what you pay for child care services for your kids under age 13, if you pay someone to take care of them while you are working. You might also be eligible for the Earned Income Tax Credit if you meet income guidelines.
Stimulus impact on the Child Tax Credit for 2021
Child Tax Credit Changes
The American Rescue Plan raised the maximum Child Tax Credit in 2021 to $3,600 for qualifying children under the age of 6 and to $3,000 per child for qualifying children ages 6 through 17. Before 2021, the credit was worth up to $2,000 per eligible child, and 17 year-olds were not eligible for the credit.
The Child Tax Credit changes for 2021 have lower income limits than the original Child Tax Credit. Families that do not qualify for the credit using the revised income limits are still eligible for the $2,000 per-child credit using the original Child Tax Credit income and phase-out amounts.
In addition, the entire credit is fully refundable for 2021. This means that eligible families can get it, even if they owe no federal income tax.
2021 Temporary Advance Child Tax Credit Payments
The Child Tax Credit has been expanded by the American Rescue Plan Act, that was enacted in March of 2021. Part of this expansion is to advance the 2021 tax credit to families by sending them direct payments during 2021 rather than having them wait until they prepare their 2021 taxes in 2022. Most families do not need to do anything to get their advance payment. Normally, the IRS will calculate the payment amount based on your 2020 tax return. Eligible families will receive advance payments, either by direct deposit or check.
The amount that you receive will be reconciled to the amount that you are eligible for when you prepare your 2021. Most families will receive about one-half of their tax credit through the advance payments. If you receive too little, you will be due an additional amount on your tax return. In the unlikely event that you receive too much, you might have to pay the excess back, depending on your income level.
For updates and more information, please visit our 2021 Child Tax Credit blog post.
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